TL/DR –
The U.S. government has begun a shutdown in October due to the lack of votes needed to pass the Concurring Resolution (CR) to fund it. The IRS released a contingency plan to use Inflation Reduction Act (IRA) dollars to pay approximately 75,000 employees for five days to keep things running, but what will happen after that is uncertain. Additional recent developments include the introduction of new tariffs on imports of timber, lumber, and their derivative products, the Senate Finance Committee meeting to discuss crypto-related legislation, the termination of various electric vehicle credits, and multiple court decisions and released guidances impacting taxes and related regulations.
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The U.S. government kickstarted October with a shutdown, following the Senate’s failure to pass the Concurring Resolution (CR) to fund the government. Despite last-minute support from Sens. Catherine Cortez Masto (D-NV), Angus King (I-ME), and John Fetterman (D-PA), the majority failed to secure the necessary Democratic votes.
Turmoil on Capitol Hill
Funding Fiasco Leads to Shutdown
This impasse was largely due to disagreements over healthcare, particularly the Premium Tax Credit. The uncertainty has led to discussions of potential workforce cuts, with the Press Secretary Karoline Leavitt hinting at layoffs in the thousands. Russ Vought, director of the U.S. Office of Management and Budget (OMB), is working alongside President Donald Trump as the shutdown continues.
The IRS, in preparation for the shutdown, had released a “lapsed appropriations contingency plan”. According to this, approximately 75,000 employees would be paid for five days using funds from the Inflation Reduction Act (IRA). With the October 15 tax deadline looming, questions remain about what happens after this five-day window, as the plan doesn’t outline a strategy for retaining employees beyond this point.
The shutdown’s effects on the IRS’s operations, such as examinations and hiring processes, remain uncertain. However, the IRS could still continue executing its “2025-2026 Priority Guidance Plan” despite the shutdown.
Tariff Twists
The tariff landscape is also undergoing changes, with President Trump imposing tariffs on timber, lumber, and their derivative products. These tariffs, effective on October 14, 2025, were implemented citing national security concerns.
Pharmaceuticals are another industry affected by the tariff changes. In a deal with Pfizer, the President secured lower drug prices for Medicaid participants in exchange for a three-year exemption from pharmaceutical-specific tariffs.
The film industry could also potentially face a 100% tariff on films produced outside the U.S., according to a post by Trump on Truth Social. However, no official documents have been released yet.
Digital Assets Legislation
The Senate Finance Committee recently discussed crypto-related legislation, backed by the Joint Committee on Taxation’s document, “Examining the Taxation of Digital Assets.” Sen. Cynthia Lummis (R-WY) has introduced Senate Bill 2207 to align the treatment of digital assets with other financial instruments.
EV Credits and Automakers’ Response
With the termination of various electric vehicle (EV) credits, automakers are launching programs to mitigate the impact of the loss of a $7,500 federal tax credit on customers.
Court Rulings
Transfer Pricing and Downward Attribution Cases
Recent court cases have delivered significant decisions on transfer pricing and downward attribution. In two major cases, the U.S. Court of Appeals for the Eighth Circuit and a decision in the Altria Group Inc. v. United States case highlighted the influence of OB3 on U.S. companies.
Newly Released Guidance
Updates on R&D, Interest Capitalization, Opportunity Zones, and More
Several important updates have been released, including Announcement IR-2025-99 concerning the research credit, TD 10034 on interest capitalization requirements, Notice 2025-50 on rural opportunity zones, and Notice 2025-46 on the application of the corporate alternative minimum tax (CAMT).
Revenue Procedure 2025-30 has also brought changes to the private letter ruling process for tax-free distribution stock of a controlled corporation transactions.
Please note that the information in this article is subject to change and does not provide legal or tax advice. Always consult with professional advisors before acting on the information provided.
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